JP Morgan's Dividend Is Best-In-Class, Likely To Remain So

| About: JPMorgan Chase (JPM)

JP Morgan Chase (NYSE:JPM) currently pays a dividend of 2.44%. This dividend does not make JPM a high-yielder. However, JPM's dividend is significantly higher than its peers. This is important for investors who are attracted to yield but also need diversification. JPM is likely to maintain a higher dividend than its competitors for the foreseeable future.

Peer Dividend Yields

  • Citigroup Inc (NYSE:C): 0.12%
  • Bank of America Corp (NYSE:BAC): 0.50%
  • Goldman Sachs Group Inc (NYSE:GS): 1.19%
  • Morgan Stanley (NYSE:MS): 1.09%
  • Well Fargo & Co (NYSE:WFC): 1.52%

JPM's dividend of 2.44% is much higher than its peers. JPM is also well positioned to raise the dividend further. JPM's current payout ratio is just 22%. However, it is likely that the future of JPM's dividend will depend largely on the Fed. JPM CEO Jamie Dimon responded to a question about the dividend by saying:

Why don't we just wait and get guidance from the Fed.

JPM earned a record $19 billion in 2011. If the most profitable bank in the U.S. cannot increase the dividend because of the Fed, then who can?

Unfortunately for JPM and its competitors, the Fed is said to be opposed to dividend increases proposed by banks. This opposition to an increase in dividend payouts will make it difficult for both JPM and its competitors to rasie the dividend. If the Fed does relax its stance on bank dividends, JPM will likely be allowed to raise its dividend more than competitors. If the Fed does not allow banks to increase dividends significantly, JPM will maintain its dividend lead over competitors.

Earnings History

JP Morgan:

Source: CNBC

5-Year Chart

JPM vs. Financial Select Sector SPDR Fund (NYSEARCA:XLF) - click to enlarge image:

Source: CNBC

JPM has outperformed competitors because it is a stronger bank. JPM's strong relative performance provides evidence that JPM is in a better position to increase the dividend than competitors.


Dividend investors who are looking for exposure to a large U.S. bank should consider JPM. JPM's dividend is higher than its peers and likely to remain so for the foreseeable future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.